THE BREAKFAST BRIEFING

In prepared remarks, the nominee to head the Federal Reserve nodded to the economic and regulatory progress made since the financial crisis, while also mentioning the work that needs to be done to keep supporting the recovery.

Wall Street’s translation: More central-bank stimulus remains on the docket.

“No way she is tapering at this time,” Andrew Brenner, head of international fixed income at National Alliance Capital Markets in New York, blasted out in a client note immediately after Ms. Yellen’s testimony was released Wednesday evening. The market action following her remarks – a bounce in Treasurys, a slip in the dollar and an uptick in U.S. stock futures – backed up that view.

She said the unemployment rate – at 7.3% in October – “is still too high, reflecting a labor market and economy performing far short of their potential.”

Inflation is also below the central bank’s 2% target and will likely remain low. “I believe that supporting the recovery today is the surest path to returning to a more normal approach to monetary policy,” Ms. Yellen said in her prepared testimony.

“Yellen’s prepared testimony suggested she supports additional accommodation until the economy is clearly and consistently on the mend,” said Lindsey Piegza, chief economist at Sterne Agee in Chicago.

Ms. Yellen’s hearing before the Senate Banking Committee , which has jurisdiction over Fed nominees, is scheduled to start at 10 a.m. New York time. Senators of both political parties expect she will be confirmed to take over when Ben Bernanke steps down Jan. 31.

Her Q&A session with lawmakers will be closely followed. Ms. Yellen is expected to be grilled over the future course of the Fed’s stimulus and the central bank’s “forward guidance” language, which is aimed at keeping interest rates near zero for the foreseeable future.

Her public remarks come at a time when the animal spirits on Wall Street remain alive and well. The Dow and S&P 500 yesterday reversed early losses and finished at fresh record highs. The benchmark 10-year yield remains well below the closely watched 3% threshold.

To be sure, investors should be on guard for any curve balls Ms. Yellen may throw in the Q&A session.

“These is nothing in the [prepared comments] that is so committal that she could not back off,” said Steven Englander, a forex strategist at Citigroup.

But Wall Street has cast her in a dovish light. There is little reason to think that will change during today’s hearing.

“Right now the market is fixated on the tapering schedule and anything that implies slightly slower timing is slightly dovish,” Mr. Englander said.

Morning MoneyBeat Daily Factoid: On this day in 1972, the Dow Jones Industrial Average closed above 1000 for the first time ever. It finished that day at 1003.16.

STOCKS TO WATCH

Shares in Tesla Motors are likely to see active trade Thursday. This follows three workers being injured by hot metal at Tesla’s facility in Fremont, Calif., on Wednesday after a low-pressure aluminum casting press failed. Liz Jarvis-Shean, Tesla’s director of global communications, didn’t elaborate on the workers’ conditions, but said they were receiving “best possible care.” Shares of Tesla were up 0.4% in after-hours trading.

Late Wednesday, Cisco said its fiscal first-quarter profit slid to $2 billion, or 37 cents a share, from $2.1 billion, or 39 cents a share, a year earlier. On an adjusted basis, the company earned 53 cents a share, above the 51 cents a share forecast by analysts. Revenue rose to $12.1 billion from $11.9 billion. Cisco shares fell 2.6% in after-hours.

Wal-Mart is forecast Thursday to post third-quarter earnings of $1.13 a share, according to a consensus survey by FactSet. Analysts at Susquehanna believe investors should temper their expectations on the retailer going into the fourth quarter due to food stamp spending cuts and a highly promotional holiday season amid ongoing economic challenges for mid- and low-end consumers.

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